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Saturday, November 25, 2017

Leftists Don’t Want Tax Cuts, So What Do They Want?

It's clear that American leftists are adamantly opposed to cutting taxes if it benefits corporations. But what would they rather have done?

In September of this year, the New York Times reported that Amazon “employed 300,000 people globally by its 20th year as a public company, the fastest any American company has reached that mark.” The Times’ source for this statistic was the Progressive Policy Institute, an organization that the newspaper described as a “left-leaning think tank.”

What’s perhaps interesting about the Amazon story is just how uninteresting it actually was. Amazon is one of the most valuable companies in the world, so naturally, its hiring pace was, and still is, rapid. Figure that in its discussion of Amazon’s hiring, the Times was explaining why there would be feverish bidding for Amazon’s second headquarters. Well, of course, there would be. It’s well known that wherever this most prosperous of companies sets up HQ2 will be the setting for abundant job opportunities at high rates of pay.

What’s crucial here is that Amazon’s planned hiring (estimates are 50,000+ workers) in the city or region that it adopts will only tell part of the story. Amazon’s jobs impact will be many multiples of 50,000 when we consider the countless small businesses that will surely cluster around the internet retailing giant. The second city chosen by Amazon will soon enough be a magnet for all manner of workers who have no intention of applying for work at Amazon itself. When corporations boom, their prosperity reaches many, many people.

The GOP Tax Plan

Ok, so what’s the point of all this? Prosperous companies employ lots of people at high levels of pay, which leads to an explosion of businesses around the flush one eager to win the patronage of its well-heeled employees. It’s all a statement of the obvious, isn’t it? One would think, but a read of the same New York Times’ reporting on the proposed Republican tax cuts signals that there’s perhaps not broad agreement within the newspaper about the effects of company success.

Allow people to choose their policy bliss, all the while not foisting their values on others. Indeed, while there’s surely good and bad in the tax-cut proposals being offered up by the Republicans, the Times’ reporters and op-ed writers have been near-uniformly negative in their analysis. Readers who generally don’t read the Paper of Record can imagine what the critiques are: apparently not enough relief for a middle-class earners who already pay very little in federal taxes to begin with, the tax cuts will supposedly cause budget deficits to balloon, and always, always, always, lots of commentary about how the Champagne-swilling rich will be the overwhelming beneficiaries. The latter is particularly comical since it’s sadly not true (top earners will pay higher income tax rates under the House GOP’s proposal), not to mention that the two most billionaire dense states – New York and California – haven’t voted Republican since the 1980s.

And then there are the corporations. In Friday’s edition of the Times, reporter Jim Tankersley observed that the proposed GOP tax cuts “make clear what the party values most: deep and lasting cuts for corporations.” Readers can rest assured that Tankersley didn’t mean the latter as a compliment. Republicans are apparently much less than noble because they care about corporations more than they do the middle class, or the poor, or some other segment of American society.

Who cares that Americans are the envy of the world, that the world’s producers fight feverishly to serve their needs at all levels of income, and who cares that the rest of the world’s poor and middle class would give anything to live in a country where the party in power values “deep and lasting cuts for corporations” over traditional cronyism and corruption; to Tankersley the GOP bill is all about harm. It’s about favoritism. It’s about doing well by the big, bad corporations while the rest of us struggle to get by, apparently.

Oh well, not everyone’s going to be satisfied with every aspect of any tax bill, thus explaining why libertarians would prefer that most taxation and legislation take place in cities and states. Allow people to choose their policy bliss, all the while not foisting their values on others. Funny how American-style liberals and progressives dismiss such freedom. They like big, top-down programs delivered from Washington. In fairness, so often times, do Republicans.

Raising Questions

Still, since Tankersley plainly thinks ill of the GOP tax proposal (as do many on the right, albeit for different reasons), it would be great if he might fully define his terms. Rather than just reporting on how harmful and rich-worshipping the GOP plan is, maybe he could explain just what he thinks is the path to prosperity, along with what will facilitate the “rapid wage growth” (Tankersley’s words) that the left hold dear. Better yet, it would be interesting to know why Tankersley himself thinks Amazon has been able to hire so many, so rapidly, and at such high pay. Where does he think the money came from?

All of these are fair questions in light of the slant in his reporting. Tankersley plainly looks askance at “deep and lasting [tax] cuts for corporations,” but in feeling that way it’s apparent he thinks the reduced corporate tax will help – you guessed it – corporations. So while some, including this writer, think the proposed corporate tax rate reduction isn’t nearly large enough, Tankersley feels it’s too large, that it will accrue too much to big business.

Can Tankersley name even one prosperous company that came to be without the backing of one or many seriously rich people? In that case, let’s take Tankersley at his word. He’s down on the corporate tax cuts for them giving “peace of mind to corporate executives planning their long-term investments,” and he is because, in his analysis, the cuts come “at the expense of added anxiety for individual taxpayers, particularly those in the middle class, who could face stiff tax increases on Jan. 1, 2026.” The last part was difficult to type out without laughing. Goodness, even if President Trump last two terms, he’ll be out by 2025. But that might be nit-picking to Tankersley. Tax cuts are bad, and he’s sticking to his story.

So Tankersley blanches at “deep and lasting cuts for corporations” for them allegedly giving “peace of mind to corporate executives,” but as Amazon’s story reminds us, its success has resulted in it having the means to be a size hirer; “the fastest any American company” to ever reach 300,000 employees according to Tankersley’s surely fact-checked newspaper. In that case, and with the middle class Tankersley reveres top of mind, wouldn’t he too support “deep and lasting cuts for corporations”? Better yet, wouldn’t he guess that corporate executives possessing “peace of mind” would be more likely to deliver “rapid wage growth”? Amazon is plainly providing more than rapid wage growth, so wouldn’t corporate tax cuts by Tankersley’s very own reasoning mean more companies like Amazon?

At the very least, it would be great if Tankersley could explain why corporations would be more likely to hire absent “deep and lasting cuts” and absent “peace of mind” in the executive suite. Barring a willingness to answer some simple questions, might Tankersley at least explain how he thinks jobs are created, and if he thinks investment might be a factor in job creation.

An answer to the second question would be particularly enlightening. Tankersley’s overriding concern is what he deems the “middle class” and “rapid wage growth” for same, but how, short of increased investment, do wages grow? Logic dictates that the rich, by virtue of being rich, possess the unspent wealth that logically morphs into investment, but Tankersley is obviously an opponent of reducing the tax burden on those most capable of investing. In that case, he might explain how his desire for “rapid wage growth” for the middle class squares with maintaining the existing tax rates on top earners and corporations. Again, aren’t savings and investment a prerequisite for higher wages, and aren’t thriving corporations better able to hire to begin with?

In Tankersley’s case, maybe he thinks government, as opposed to the private sector, is the source of economic sustenance? It’s hard to say. Surely he knows that a billionaire by the name of Carlos Slim has made it possible for him to report on why tax relief for rich individuals and corporations is unfortunate, but how interesting it would be to hear him explain why he earns what is most certainly a nice wage at the world’s greatest newspaper that is still great thanks to Slim’s immense wealth. Did middle-class earners make his work possible, or was it a billionaire? Can Tankersley name even one prosperous company that came to be without the backing of one or many seriously rich people? Back to government, if he thinks it’s the source of middle-class bliss, might he be able to provide a quick answer to this question: is it true, yes or no, that the top 1 percent of earners account for a massively disproportionate share of federal tax receipts? If yes, would he then acknowledge that government can only dispense largess and “create jobs” insofar as rich individuals and corporations are thriving?

If Not This, Then What?

Too many questions? Maybe so. And then isn’t Tankersley a reporter as opposed to an editorial writer? True, but his reporting reveals a strong bias against tax relief for corporations. So his reporting has an editorial slant, which is fair enough. We all have our biases that will greatly impact how we see things. But since Tankersley is human and has his own biases about tax policy, job creation and wages, he might explain to his readers how he thinks jobs and “rapid wage growth” come about. He clearly wants more of both, as do many free-thinkers on the right. They’ve laid their cards on the table, Tankersley obviously disagrees, so it would be great to know what he thinks. If he answers, one can only hope that his answer isn’t evasive.

Which raises the question yet again, what do the left want? Tankersley could do as many on the left do, and point to Bill Clinton’s presidency as evidence that tax hikes and big government coincide with economic growth. Except that such a statement creates a false impression about Clinton’s presidency, one that liberal historian Richard Reeves referred to as Ronald Reagan’s third term.  While income tax rates on top earners rose under Clinton, at 39.6 they were nowhere close to the rates that prevailed under no less than Ronald Reagan right up to 1986.For good or bad, Republicans are merely trying to maintain the tax rates that prevailed under lefty hero Clinton, while more aggressive Republicans would like to emulate Clinton’s hero in the tax-cutting JFK.

Capital gains taxes? You know the penalty levied on investment returns in big, bad corporations? Clinton signed a reduction in the rate to from 28 to 20 percent into law in 1997. The tax that is government spending? Relatively major restraint there as evidenced by Clinton’s last budget coming in at roughly $1.8 trillion. The dollar?  Robert Rubin and Lawrence Summers never talked it down, and the resulting dollar strength was a major lure for the investment that means a great deal to corporations and executives.

To be clear, many on the right would like to return to many of the policies that succeeded so well under Reagan, and surely Clinton. Not Tankersley, apparently.  What’s good for the rich and corporations is seemingly not good for the middle class in need of jobs. Which raises the question yet again, what do the left want? What tax policies are good for middle-class earners who already pay very little in federal taxes in the first place? We’re all ears.

Reprinted from Forbes

  • John Tamny is Director of the Center for Economic Freedom at FreedomWorks, a senior economic adviser to Toreador Research & Trading, and editor of RealClearMarkets.